Inflation holds steady at 2%
The prospect of an interest rate cut in August is hanging in the balance.
17th July 2024 07:59
by Myron Jobson from interactive investor
Commenting, Myron Jobson, Senior Personal Finance Analyst at interactive investor, says: “The possibility of a cut to interest rates at the start of August hangs in the balance following the latest inflation reading, which came in slightly higher than expected.
“It was more of the same for key inflation data in June, with headline inflation, core CPI, and CPI services remaining unchanged from May. It is not the best inflation report for Bank of England policymakers, who are watching for further evidence that it has brought rampant inflation under control.
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“Bank of England officials look at the full economic picture when setting interest rates. Metrics relating to labour market tightness, pay growth, and services price inflation are not quite where the Bank of England wants them to be to lessen the threat of entrenched inflation. Cutting interest rates too soon risks undermining the progress on inflation.
“Attention will now turn to labour market data tomorrow as the Bank mulls over whether to begin cutting interest rates at the start of August. Lower interest rates would offer some reprieve to mortgage rates and lower the cost of borrowing more broadly, but the reverse is true when it comes to savings rates.
“When it comes to inflation, it is important to remember that we all have a personal inflation number that is unique to each individual. That’s because we don’t all buy the same goods and services. As such, your inflation rate might end up being lower, or higher, than the headline figure.”
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